Franchising has the potential to help your business become a national brand and could be a solution if you want to rapidly expand your business at a rate that you could not otherwise do on your own. However, there is information out there suggesting that franchising will help grow your struggling business. So will franchising help grow a struggling business and what is considered a struggling business you ask? Maybe your business is not doing well, sales are low, you cannot keep employees and competition is making it tough. Perhaps you are looking for a way to increase your sales transactions, so you think that the best way to do this is by franchising your business. So is it true, will franchising help your struggling business? Let’s explore this a bit further.
Franchising is the Business of Helping Other People Succeed in Business
If your business is not doing well and is struggling then it makes NO sense to franchise. The truth is that franchising is a completely different business. Franchising is the business of helping other people to be successful in business (more about what franchising a business means). So in reality it is another endeavor entirely and must be treated as a completely different business. As with any new business it takes effort, energy, and funding. If you are lacking funds to make your current business work; then more than likely you do not have the resources necessary for franchising. This should automatically take franchising off the table. While franchising (when executed correctly) eventually brings name recognition, it will not solve your current operational problems or increase the number of sales transactions for your business. Your business should be making money before you even think about franchising (find out if there is a minimum amount of money you must make before you franchise). In other words, franchising is not the solution to help drive more business directly to you.
Franchising is about duplicating a business that has achieved some level of success so that your operational know-how can be taught to future franchisees (watch a video on this topic). Franchising is not about bringing franchisees on board to test out what works. Simply put, franchising is about someone looking to own their own business and buy into a program that already works. Think about it…if you are struggling to keep your business afloat how can you expect a franchisee to do any better following in your footsteps? If you attempt to franchise knowing that what you are doing does not work and you represent that this is a business model that has everything figured out, then this is defined as fraud. Franchising is considered to be a safer investment (compared to a business opportunity) because it is regulated by the government in an effort to protect the consumer against such misrepresentations.
On the other hand if your business is doing well and you believe you have developed a magic formula that changes the game for your industry, then franchising can help bring recognition to your brand. As a franchisor, you can make money in not all kinds of different ways (learn about the ways you can make money franchising your business), which gives you the bandwidth to thing you otherwise could not do on your own.
What About My Employees Becoming a Franchise
So franchising does not make sense if your business is struggling. What about the idea of wanting to franchise your business so you can turn your employees into franchisees? Whether it is to eliminate employer taxes, avoid healthcare requirements, save payroll, or however you are trying to eliminate expenses, this makes NO sense. Sure, the idea of an employee owning a franchise can absolutely be done after your business is turned into a franchise which is very common (see our article on franchising for employees); but to take an entire staff of employees who all work in the same geographic area and turn them into individual franchisees to save payroll (or for whatever reason) is very unrealistic.
Why? Simply because if you are still doing sales, generating leads or scheduling jobs for your employee now turned into a franchisee, then this can be considered a joint-employer relationship and not a franchise relationship (read “Are Franchisees Considered Employees?”). In a franchise relationship your franchisee is fully responsible for running his/her business independent of you. You cannot simply reclassify employees as franchisees for the reasons mentioned above and this is just the tip of the iceberg.
Franchising is Not for Struggling Businesses
Now you know franchising is not really a solution for a business struggling to survive. Thinking you can franchise to help grow your own business, make more local sales, close more transactions or reclassify employees as franchisees is dead wrong. Franchising will help you if you have a business that is doing well and self-sustaining. Franchising could be a solution if you have the desire to expand into other markets by teaching others how to operate a business using successful and proven methods and/or operational strategies developed by you that generate results. In our opinion, if your business is struggling then honestly it is better to put the idea of franchising on the top shelf for now and focus on growing your business. Want to find out the how to franchise and if franchising your business makes sense? Call us directly at 1-877-615-5177. We will gladly answer ALL of your questions.
- Should You Franchise Your Business
- Can You be a Franchisor
- How to Know if Your Business is Franchisable
- When Starting a Franchise Things to Consider
- Requirements to Franchise Your Business
